Wise Debt Collection Processes That Work While In The Rough Economy

Article Written By: James F. Killingsworth

Successful debt collection strategies begin with a procedural implementation long before a bill is overdue. Determining policies related to collecting on defaulted payments is essential to the foundation of the company, and all policies should be disclosed in the terms of service shared with clients, right alongside sales information and procedures.

Putting your debt collection policies in writing for the client, just as you would any other contractual obligations, helps to show the validity of the company and its determination to recover lost funds. This assures all debt collection efforts are taken seriously by the client and improves the success of efforts to obtain payment in the future.

To ensure the greatest benefit by maintaining a good, healthy relationship with the customer, a business may also consider implementing a goodwill collection call policy. This is a call that is made before the terms of the sale expire and the debt becomes overdue. This helps with quality assurance for the company, verifying invoicing and documentation are correct, as well as a good faith reminder to the client.

Of course, once payments are overdue, it is essential to take immediate action toward debt collection. Severely delinquent accounts are harder to collect on and only serve to weigh down the financial records. The best way to assure rapid success of debt collection is to classify each delinquent account based on its circumstances.

Debts should be pursued differently, depending on the circumstances of the account. For example, a newly delinquent account from a recently acquired customer would be handled differently than a high balance delinquent debt or a traditionally slow paying account. Set a threshold to determine the classifications, and create a process for debt collection of each category. This will improve success rates.

When creating the process for debt collection of each type of account, start with a time frame in which collection efforts are expected to be handled. For example, for high risk debts (with high balances), collection efforts should begin early and, if necessary, include steps to implement a payment plan to recover lost funds. By contrast, a slow paying account could be suspended until all payments are up to date.

Placing greater focus on newer accounts for debt collection can assist in clearing unpaid debt. Pursuing these clients quickly can assist in recovering funds, and because these newer clients have not been a part of the financial basis of the company for a long time, canceling their credit accounts will reduce the number of delinquent payments going forward without creating a void in the company bank account.

Knowledge of each classification of delinquent debt and how to properly pursue the collection of that debt is the most important part of generating the cash flow you need to recover delinquent debt. Having your strategies for debt collection outlined prior to the necessity of pursuing delinquent accounts aids in quicker and more successful recovery of debt.

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Next, explore more important information and resources about debt collection, as well as collection agency options.

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